Espanyol was founded on 28 October 1900 by Ángel Rodríguez Ruiz (1879—1959), an engineering student at the University of Barcelona. The club's original home was in the well-off district of Sarrià and was initially known as the Sociedad Española de Football. One year later, the club changed its name to Club Español de Fútbol. Espanyol was the first club in Spain to be formed exclusively by Spanish fans of the game.

The club originally played in bright yellow shirts, with the colour of the shorts being left to the individual player. A friend of the club founder owned a textile business and happened to have an abundance of yellow material left over from a job. In 1910, the club changed its name to Club Deportivo Español and chose blue and white stripes as shirt colours and as the central colours of the club badge. Blue and white was chosen in homage to the colours appearing on the shield of the great Sicilian-Aragonese Admiral Roger de Lluria, who sailed the Mediterranean protecting the interests of the Crown of Aragon in the Middle Ages. The club were successful from the very beginning, winning the Campionat de Catalunya in 1903 and subsequently playing in the Copa del Rey.

In 1906, the club folded due to financial reasons and most of the players joined the X Sporting Club. This club won the Campionat de Catalunya three times between 1906 and 1908. In 1909, this club was effectively relaunched as Club Deportivo Español, and in 1910, they adopted their present day colours. Espanyol are one of several Spanish football clubs granted patronage by the Spanish crown and thus entitled to use Real in their names and the royal crown on their badge. This right was granted to Espanyol in 1912 by Alfonso XIII and the club subsequently became known as Real Club Deportivo Español.

Following the abdication of Alfonso XIII in 1931 and the declaration of the Second Spanish Republic, due to prohibition of royal symbols, the club adopted the more Catalan/republican friendly name, Club Esportiu Espanyol. After the Spanish Civil War, the name reverted to Real Club Deportivo Español.

The club took the Catalan spelling for its name in February 1995. The word Deportiu in Reial Club Deportiu Espanyol de Barcelona is a Catalanised form of the original word Deportivo (Castilian), despite the correct word being Esportiu in the Catalan language. This choice was made in order to retain the initials RCD in the club's name.

Their opponent in the Round of 32 was Italian side Livorno, who had just scraped into the knockout stages. Espanyol were 4–1 victors on aggregate, recording a 2–1 win in Tuscany and finishing the job 2–0 in Barcelona. Next up was Israeli side Maccabi Haifa, and after a dour 0–0 draw in the away leg, Espanyol thrashed their Israeli counterparts 4–0 in the second leg. Many were starting to see Espanyol as favourites to go all the way to the final in Glasgow's Hampden Park.

However, if that were to be the case, Espanyol would have to defeat Portuguese giants Benfica, two-time European Cup winners. Espanyol did not seem fazed by this, as they raced into a 3–0 lead in Spain. However, Benfica fought back and scored two away goals to leave the tie firmly in the balance. Nevertheless, Espanyol survived a daunting trip to Lisbon, coming away with a 0–0 draw, which was enough to book them a place in the semi-finals.

Germans Werder Bremen lay in wait for the Catalan side in the last four, but once again, Espanyol produced a brilliant home performance to virtually seal the tie on the night. A 3–0 rout of the Germans put the Spanish firmly in control, and any real doubts about their passage to the final disappeared, with a 2–1 win in Bremen. In the final, held on 16 May in Glasgow, Scotland, Espanyol fell to fellow La Liga side Sevilla, losing 3–1 in a shootout following a 2–2 draw. They became the only football team in UEFA Cup history to remain unbeaten in the tournament, yet didn't take home the trophy. Walter Pandiani, who would leave the club at the end of the season, was the top goal scorer of the UEFA Cup of that season.

Espanyol's local rival has always been FC Barcelona. Blanc-i-blaus, being one of the clubs granted royal patronage, was founded exclusively by Spanish football fans, unlike the multinational nature of Barça's primary board. The founding message of the club was clearly anti-Barcelona, and they disapprovingly saw FC Barcelona as a team of foreigners.[1] The rivalry was strengthened by what Catalonians saw as a provocative representative of Madrid.[2] Their original ground was in the affluent district of Sarrià.[3][4]

During the dictatorships of Miguel Primo de Rivera (1923-1930) and Francisco Franco (1939-1975), Espanyol was seen by the vast majority of Barcelona's citizens as a club which cultivated a kind of compliance to the central authority, in stark contrast to Barça's revolutionary spirit.[5] Also in the '60s and '70s, while FC Barcelona acted as a social integrator for immigrants from poorer regions of Spain in search for a better life, Espanyol drew their support mainly from sectors close to the regime such as policemen, military officers, civil servants and career fascists.[6]

Though it is the most played local derby in the history of La Liga, it is also the most unbalanced, with Barcelona overwhelmingly dominant. In the league table, Espanyol has only managed to end above Barça on three occasions in almost 70 years and the only all-Catalan Copa del Rey final was won by Barça in 1957. Espanyol has the consolation of achieving the largest margin win with a 6–0 in 1951. Espanyol achieved a 2–1 win against Barça during the 2008–09 season, becoming the first team to defeat Barcelona at Camp Nou in their treble-winning season.[7]

In 1928, Espanyol became a founding member of La Liga, and in 1929, the team won their first Copa del Rey. Espanyol has completed the highest number of seasons in La Liga without actually winning the title.

The team has qualified seven times for the UEFA Cup[8] (including the 2006–07 qualification following the 2006 Spanish Cup win) and reached the final in 1988, losing to Bayer Leverkusen of then-West Germany on penalty kicks (3–2), after a memorable home-and-away final (3–0 in Barcelona, 0–3 in Leverkusen), and in 2007, losing to Sevilla on another penalty kicks round (3–1), after a memorable match (ended 1–1 after normal time, and 2–2 after extra time).